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Energy Innovation Back on the Federal Agenda

By Jason Burwen

Monday, May 11, 2015

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Energy innovation is back on the federal policymaking agenda. Recently, lawmakers and think tanks in Washington have made a number of proposals intended to drive more investment into energy technology research, development, and demonstration (RD&D).

Many current efforts focus on maximizing the return from public investments in energy RD&D. Numerous proposals focus on enhancing partnerships between private companies, universities, and Department of Energy (DOE) National Laboratories for technology transfer. Some of these bills, like H.R. 1158 and S. 1187, are focused on increasing the flexibility of the National Laboratories to enter into partnerships, such as by increasing discretion for smaller contracts and authorizing funds to be used for technology transfer activities. Other bills, like S. 784 and S. 2973 from the 113th Congress, attempt to make national laboratories more accessible to businesses interested in partnering with them. These efforts follow on a recent Brookings report on public-private partnerships as part of regional economic development, recommending contracting processes and other processes specifically intended to help small- and medium-sized businesses partner with National Labs.

These efforts are mirrored by efforts to reallocate more R&D funds toward technology transfer activities. Some bills, such as provisions in H.R. 962 or H.R. 4186 from the 113th Congress, reallocate greater amounts of federal R&D budgets to technology transfer activities. And building on the authorization last year of $300 million for advanced manufacturing innovation institutes, bills like H.R. 1441 and S. 1054 could increase science and engineering efforts on advanced manufacturing processes that are critical for new energy technologies.

Another method that could drive further partnerships would be to reduce private-cost share requirements under certain circumstances, such as in priority technology areas. For example, a proposal in the version of the America COMPETES Act reauthorization moving through the House would enable DOE’s fossil energy R&D program to reduce the private cost-share for transformational coal R&D projects, a priority area. Furthermore, strategically relaxing the limitation on private R&D cost-shares using other federal incentive programs could enable greater R&D projects in priority technology areas.

These efforts reflect a general bipartisan agreement on the value of public investments at DOE National Laboratories. While federal investments in energy RD&D have remained flat since 2010, it appears that the current House appropriations bill for DOE energy R&D will at least maintain this level across most programs. Some bills, like H.R. 1398, would go further and increase authorizations for basic research programs. Some lawmakers have proposed new R&D authorizations altogether, such as H.R. 874, which would establish an exascale computing R&D program, or S. 1058, which would establish a national marine hydrokinetic RD&D center. And bills like H.R. 1870 and H.R. 1872 would re-authorize cross-cutting energy research initiatives first started at DOE in 2010. Greater federal investments in energy innovation would ensure a full pipeline of discoveries and inventions for private sector innovation to build into new product, businesses, and jobs.

Other proposals focus on increasing incentives for private R&D investments. A proposal to make permanent the tax credit for research and experimentation (commonly termed the “R&D tax credit”) has been re-introduced in H.R. 880, which follows bipartisan efforts across several previous congressional sessions. A complementary proposal, typified in S. 1658 in the 113th Congress, focuses on enabling small companies without sufficient tax liability to be able to monetize the R&D tax credit. In addition to making the R&D tax credit permanent, a specific focus on energy technology R&D, such as the recommendation by the Information Technology and Innovation Foundation, could target investments to the energy sector better.

Finally, policymakers could revive previous proposals to lever private finance for energy innovation. S. 949 from the 111th Congress, a bipartisan bill co-sponsored by current Senate Energy and Natural Resources Chairwoman Lisa Murkowski, would create financing tools for the federal government to drive greater private investment in first-of-a-kind energy technologies. If capitalized from federal lease revenues or other sources of funds in a manner similar to previously proposed energy trust funds, such a program could be fully offset. Other bills, like S. 1181, would expand existing financing tools that DOE employs to spur innovation.

Policymakers have a variety of bipartisan ideas to improve private investment in energy innovation: enhancing partnerships to maximize returns on public investments, increasing those investments strategically, and levering greater private investments. Whether that can be crafted into a package remains to be seen, but the timing has in some respects never been better for Congress to make a bold and bipartisan advance on energy innovation.